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C. General Business Disclosures

This section includes disclosures for operations which are significant in size and/or nature for Finance.

C1 General insurance activities

Finance provides insurance and risk management services to Australian General Government Sector entities. The classes of business cover include: Liability, Property, Motor Vehicle, and Personal Accident and Travel.

These services are funded from the Comcover Special Account, refer to Note F3.1.

Policy and measurement

Premium revenue

Premium revenue includes amounts charged excluding Goods and Services Tax (GST). Premiums are recognised as revenue over the period insured which is from 1 July to 30 June each year.

Notional reinsurance expense

A notional reinsurance charge of $5.0 million is paid to the Official Public Account (OPA) each year.

Reinsurance and other recoveries

Reinsurance and other recoveries received or receivable in respect of gross claims paid and movements in reinsurance and other recovery assets are recognised as revenue in the year they occur.

Reinsurance and other recovery assets are actuarially assessed as the present value of the expected future receipts,

calculated on the same basis as the outstanding claims liability.

Insurance claims expense and outstanding insurance claims liabilities

Claims expense represents claims payments and the movement in the gross outstanding claims liability.

The outstanding insurance claims liability is actuarially assessed and measured at the central estimate of the present value of expected future payments of claims incurred at the reporting date with an additional risk margin to allow for inherent uncertainty in the central estimate. The expected future payments include those in relation to unpaid reported claims; claims incurred but not reported (IBNR); claims incurred but not enough reported (IBNER); and indirect expenses that are expected to be incurred in settling these claims. Changes in claims estimates are recognised in the surplus/(deficit) in the year in which the estimates are changed.

Assets backing general insurance liabilities

The balance of the Comcover Special Account and receivables from insurance activities are held to back general insurance liabilities. For further information in relation to the Comcover Special Account, refer to Note F3.1.

Key judgements and estimates

Finance takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. The claim estimates and judgements are regularly evaluated and updated based on historical experience and other factors. However, given the uncertainty in the estimation process, it is likely that the final outcome will prove to be different from the original liability established.

Finance’s activities are classified into two main categories: Property (Property, Motor Vehicle and Personal Accident and Travel) and Liability. Different actuarial methods and assumptions are applied at a more granular level taking into account the characteristics of the class of business, claim type and the extent of the development of each past accident period.

The estimation of IBNR and IBNER are generally subject to a greater degree of uncertainty where claims notification and settlement may not happen for many years after the event giving rise to the claim. For this reason, Liability classes of business typically display greater variability between the initial estimates and final outcomes.

Key actuarial assumptions

The key actuarial assumptions for the determination of the outstanding claims liabilities are set out in the table below:

30 June 2021

30 June 2020

Property

Liability

Property

Liability

Average discount rate

0.4%

0.5%

0.3%

0.4%

Average inflation rate

2.3%

2.9%

2.1%

2.8%

Average weighted term to settlement (years)

1.8

2.4

2.0

2.7

Expense rate

0.9%

0.8%

1.1%

2.3%

Risk margin

17.9%

29.5%

21.7%

22.6%

Process used to determine actuarial assumptions

Discount rate

To allow for the time value of money, projected payments are discounted at a risk free rate derived from market yields on Australian Government securities at the reporting date.

Inflation rate

Claims inflation is incorporated into the resulting projected payments to allow for both expected levels of economic inflation and superimposed inflation. Economic inflation is based on economic indicators such as the Consumer Price Index (CPI) and/or increases in average weekly earnings. Superimposed inflation is past claims inflation in excess of wage inflation. A review of past claims reveals no evidence of superimposed inflation.

Average weighted term to settlement

The average weighted term to settlement is based on historic payment patterns.

Expense rate

Claims handling expenses are calculated by reference to Finance’s claims handling remuneration agreements for direct expenses and internal costs for indirect expenses.

Risk margin

The risk margin is assessed by examining the historical variability of the claims experience, considering industry studies and benchmarks and applying actuarial judgement, especially in respect of uncertainties not reflected in the claims data. This assessment is performed for each class of business. Diversification benefit is allowed for, with consideration given to industry studies and benchmarks.

Sensitivity analysis

Finance has conducted sensitivity analysis to quantify the impact of changes in the key underlying assumptions on the surplus/(deficit). The sensitivity analysis has been performed for each variable independently of all other changes and is net of reinsurance and other recoveries. The table below describes how a change in each assumption will affect the surplus/(deficit).

30 June 2021

30 June 2020

Property

Liability

Property

Liability

Assumption

Movement

$'000

$'000

$'000

$'000

Average discount rate

+1%

6,097

18,955

6,749

7,229

-1%

(5,847)

(18,118)

(6,461)

(6,857)

Average inflation rate

+1%

(5,862)

(18,087)

(6,473)

(6,848)

-1%

5,990

18,537

6,626

7,070

Average weighted term to settlement (years)

+1 year

(6,587)

(18,497)

(5,776)

(6,093)

-1 year

5,766

17,808

5,536

7,246

Expense rate

+1%

(3,187)

(7,670)

(3,258)

(2,552)

-1%

3,187

7,670

3,258

2,552

Risk margin

+1%

(2,728)

(5,969)

(2,707)

(2,130)

-1%

2,728

5,969

2,707

2,130

The movements are the absolute movement in the assumption (e.g. +1% increase in the expense rate for Property from 0.9% to 1.9%).

Insurance risk management

Finance is exposed to insurance risk, which is discussed below.

Objectives, policies and processes for managing insurance risk

Finance provides insurance and risk management services to deliver a net benefit to the Australian Government over the longer term. The transfer of insurance risk from participating General Government Sector entities offers the most comprehensive and cost effective approach to the management of risk exposures. The provision of a captive fund focuses on improving risk identification and management in entities and increases in transparency and accountability to the Australian Government and the public.

Key processes to manage the insurable risk exposure of the Commonwealth include:

  • Detailed risk exposure surveys
  • Actuarial modelling of claims history, exposures and industry experience to provide an estimate of expected claims costs for the insured year and to determine the annual premium collection
  • Claim management and investigation processes
  • Appointment of an independent actuary for valuation services of the outstanding claims liability
  • Whole of government policy development and risk management advisory and education services to improve risk awareness and capability of Fund Members.

Concentration of insurance risk

No reinsurance policies were placed in 2020-21 (2019-20: nil), reflecting the capacity of the Australian Government to
cost-effectively self-insure against infrequent large claims.

C1.1 Underwriting result

Departmental

30 June

30 June

2021

2020

$'000

$'000

Direct premium revenue

Premium revenue

164,520

137,795

Premium revenue eliminated on consolidation

2,137

1,252

Total direct premium revenue

166,657

139,047

Notional reinsurance expense

(5,000)

(5,000)

Net premium revenue

161,657

134,047

Net incurred claims

Insurance claims

(651,682)

(249,311)

Reinsurance and other recoveries revenue

2,163

6,434

Total net claims

(649,519)

(242,877)

Other underwriting expenses

(8,352)

(8,134)

Underwriting result

(496,214)

(116,964)

Revenue from Government

420,851

8,191

Operating surplus/(deficit)

(75,363)

(108,773)

C1.2 Net claims incurred

30 June 2021

30 June 2020

Current year

Prior years

Total

Current year

Prior years

Total

$'000

$'000

$'000

$'000

$'000

$'000

Gross claims incurred

Undiscounted

178,779

467,898

646,677

269,804

(31,013)

238,791

Discount and discount movement

(3,275)

(2,705)

(5,980)

(2,652)

8,526

5,874

Gross claims incurred discounted

175,504

465,193

640,697

267,152

(22,487)

244,665

Reinsurance and other recoveries

Undiscounted

(591)

(1,566)

(2,157)

(1,270)

(5,116)

(6,386)

Discount and discount movement

-

(6)

(6)

-

(48)

(48)

Reinsurance and other recoveries discounted

(591)

(1,572)

(2,163)

(1,270)

(5,164)

(6,434)

Net claims incurred

174,913

463,621

638,534

265,882

(27,651)

238,231

Claims handling expense

10,985

4,646

Total net claims

649,519

242,877

The $463.6 million increase in prior years net claims incurred is due to adverse development for individual Liability claims partially offset by favourable experience for Property in relation to weather events. The current year net claims incurred is impacted by adverse claims experience in the Property portfolio due to fire damage and adverse weather events.

C1.3 Reinsurance and other recoveries receivable

Departmental

30 June

30 June

2021

2020

$'000

$'000

Reinsurance and other recoveries

Reinsurance and other recoveries

2,536

2,709

Discount to present value

(99)

(106)

Total reinsurance and other recoveries

2,437

2,603

C1.4 Outstanding insurance claims liability

Departmental

30 June

30 June

2021

2020

$'000

$'000

Gross claims liability - undiscounted

871,675

480,039

Discount to present value

(9,071)

(4,127)

Gross claims liability - discounted

862,604

475,912

Claims handling expense

7,150

7,818

Gross central estimate

869,754

483,730

Risk margin

224,888

106,829

Outstanding insurance claims liability

1,094,642

590,559

Risk margin adopted

25.9%

22.1%

Probability of adequacy of the risk margin

75%

75%

Reconciliation of the movement in discounted outstanding claims liability

30 June

30 June

2021

2020

Property

Liability

Total

Total

$'000

$'000

$'000

$'000

Net outstanding claims liability at the beginning of the year

328,826

259,130

587,956

471,477

Incurred claims

96,140

78,773

174,913

265,882

Claims payments

(68,309)

(65,975)

(134,284)

(121,752)

Unwinding of discount

573

428

1,001

3,536

Risk margin release

(12,402)

(13,597)

(25,999)

(18,768)

Changes in assumptions and experience

(23,601)

512,219

488,618

(12,419)

Net outstanding claims liability at the end of the year

321,227

770,978

1,092,205

587,956

Reinsurance and other recoveries

420

2,017

2,437

2,603

Gross outstanding claims liability at the end of the year

321,647

772,995

1,094,642

590,559

C1.5 Claims development table

The following table shows the development of the estimated undiscounted outstanding claims relative to the ultimate expected claims for the 10 most recent accident years.

Prior

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Total

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

Estimate of net ultimate claims costs

At end of accident year

61,550

66,779

114,162

102,138

91,686

86,286

93,055

117,798

219,627

150,603

One year later

70,345

63,441

106,114

119,144

87,813

91,391

139,062

109,241

248,787

Two years later

67,843

65,399

96,653

218,627

96,971

89,415

159,898

110,226

Three years later

68,396

62,028

89,631

215,052

92,516

85,866

163,988

Four years later

67,312

58,498

82,685

205,636

80,781

96,024

Five years later

62,705

55,203

75,963

196,769

79,076

Six years later

59,872

54,526

69,127

194,916

Seven years later

61,182

52,551

72,773

Eight years later

61,165

53,900

Nine years later

65,154

Estimate of net ultimate claims costs

65,154

53,900

72,773

194,916

79,076

96,024

163,988

110,226

248,787

150,603

Cumulative payments

57,357

50,497

68,458

175,233

63,580

61,845

100,985

43,937

58,861

15,669

Net claims liability - undiscounted

330,508

7,797

3,403

4,315

19,683

15,496

34,179

63,003

66,289

189,926

134,934

869,533

Discount to present value

(1,270)

(19)

(6)

(16)

(110)

(101)

(302)

(553)

(917)

(2,956)

(2,739)

(8,989)

Net claims liability - discounted

329,238

7,778

3,397

4,299

19,573

15,395

33,877

62,450

65,372

186,970

132,195

860,544

Claims handling expense

7,150

Net central estimate

867,694

Net risk margin

224,511

Total net outstanding claims liability

1,092,205

Reinsurance and other recoveries

2,437

Total gross outstanding claims liability

1,094,642

The claims development table discloses amounts net of reinsurance and other recoveries to give the most meaningful insight into the impact on surplus/(deficit).

C2 Investment Funds

Finance provides advice on the investment mandates and governance arrangements for the investment funds. This includes advice on the credit of amounts to, and debits of amounts from, the investment funds. The Future Fund Board of Guardians (the Board), supported by the Future Fund Management Agency (FFMA), is responsible for the management and investment of the assets of the investment funds. The investment funds consist of the respective special accounts and the investments of the:

  DisabilityCare Australia Fund (DCAF) – an investment fund established by the DisabilityCare Australia Fund Act 2013 to support the Commonwealth’s ability to reimburse States and Territories, and the Commonwealth Government for expenditure incurred in relation to the National Disability Insurance Scheme Act 2013.

  Medical Research Future Fund (MRFF) – an investment fund established under the Medical Research Future Fund Act 2015 to support medical research and innovation into the future.

  Aboriginal and Torres Strait Islander Land and Sea Future Fund (ATSILSFF) – an investment fund established under the Aboriginal and Torres Strait Islander Land and Sea Future Fund Act 2018 to support the making of annual and discretionary payments to the Indigenous Land and Sea Corporation.

  Future Drought Fund (FDF) – an investment fund established under the Future Drought Fund Act 2019 to fund initiatives that enhance future drought resilience, preparedness and response across Australia.

  Emergency Response Fund (ERF) – an investment fund established under the Emergency Response Fund Act 2019 to fund emergency response and recovery following natural disasters in Australia that have significant or catastrophic impact as well as resilience initiatives. The Act allows the Government to draw up to $200 million in any given year, beyond what is already available to fund emergency response and natural disaster recovery and preparedness, where it determines the existing recovery and resilience-building programs are insufficient to provide an appropriate response to natural disasters.

Prior year

Figures in prior year comparatives include amounts in the Building Australia Fund (BAF) and the Education Investment Fund (EIF) which were closed on 2 September 2019 and 12 December 2019 respectively. Further details are included in Note F3.2.

Key judgements and estimates

In applying Finance's accounting policies, management has made a number of judgements and applied estimates and assumptions to future events. Judgements and estimates which are material to the financial statements are located throughout the investment funds disclosure.

Policy and measurement

Investment mandate

Each fund has an investment mandate that is determined by the responsible Ministers under legislation. For the DCAF, the investment mandate sets a target benchmark return of the Australian three month bank bill swap rate + 0.3% per annum calculated on a rolling 12 month basis (net of fees). The investment mandate also requires the Board to invest in such a way as to minimise the probability of capital losses over a 12 month horizon.

The investment mandate for the MRFF sets an average return of at least the Reserve Bank of Australia (RBA) Cash Rate target + 1.5% to 2.0% per annum, net of investment fees, over a rolling 10 year term as the benchmark return on the Fund. In targeting the benchmark return, the Board must determine an acceptable but not excessive level of risk measured in terms such as the probability of losses in a particular year.

The investment mandates for the ATSILSFF, FDF and ERF set a benchmark return of CPI Index + 2.0% to 3.0% per annum, net of investment fees over the long term. In targeting the benchmark return, the Board must determine an acceptable but not excessive level of risk, including having regard to the plausible capital loss from investment return.

Investments

All investments are designated as financial assets through profit and loss on acquisition. Subsequent to initial recognition, all investments held at fair value through profit and loss are measured at fair value with changes in their fair value recognised in the Administered Schedule of Comprehensive Income each reporting date.

Investments are recognised and derecognised on trade date where purchase or sale of an investment is under a contract, the terms of which require delivery of the investment within the timeframe established by the market concerned. Investments are initially measured at fair value, net of transaction costs that are directly attributable to acquisition or issue of the investment.

Investments in collective investment vehicles are recorded at fair value on the date which consideration is provided to the contractual counterparty under the terms of the relevant subscription agreement. Any associated due diligence costs in relation to these investments are expensed when incurred.

The following methods are adopted by the investment funds in determining the fair value of investments:

  Listed securities and investments in listed managed investment schemes including exchange traded futures and options are recorded at the quoted market prices on relevant stock exchanges.

  Unlisted managed investment schemes and collective investment vehicles are re-measured based on the estimated fair value of the net assets of each scheme or vehicle at the reporting date. Collective investment vehicles are entities that enable investors to pool their money and invest the pooled funds, rather than buying securities directly. Collective investment vehicles are used to invest in private equity funds, hedge funds, debt funds, listed equity funds, infrastructure funds and property funds and are usually structured as interests in limited partnerships and limited liability companies.

In determining the fair value of the net assets of unitised unlisted managed investment schemes and collective investment vehicles, reference is made to the underlying unit price provided by the Manager (where available) and capital account statements and the most recent audited financial statements of each scheme or vehicle.

Manager valuation reports are reviewed to ensure the underlying valuation principles are materially compliant with Australian Accounting Standards and applicable industry standards including International Private Equity and Venture Capital Valuation Guidelines as endorsed by the Australian Investment Council.

  Derivative instruments including forward foreign exchange currency contracts, swaps, options, forward contracts on mortgage backed securities, futures and rights and warrants are recorded at their fair value on the date the contract is entered into and are subsequently re-measured to their fair values at each reporting date. The investment funds have entered into derivative contracts to manage their exposure to foreign exchange risk, interest rate risk, equity market risk and credit risk. The investment funds also use derivatives to gain indirect exposure to market risks. The use of derivative financial instruments by the investment funds is governed by the Disability Care Australia Fund Act 2013, the Medical Research Future Fund Act 2015, the Aboriginal and Torres Strait Islander Land and Sea Future Fund Act 2018, the Future Drought Fund Act 2019 and the Emergency Response Fund Act 2019. Further disclosure regarding the use of derivatives by the investment funds is presented in Note C2.3.

  Interest bearing securities including asset backed securities, bank bills, negotiable certificates of deposit, mortgage backed securities, government securities and corporate debt securities which are traded in active markets are valued at the quoted market price. Securities for which no active market is observable are valued at current market rates using broker sourced market quotations and/or independent pricing services as at the reporting date.

MRFF Investment Companies

Whilst all investments are held by the Future Fund Board of Guardians (the Board) in respect of the relevant Administered Investment Fund, some investments are indirectly held through wholly owned investment holding companies, MRFF Investment Companies (MRFFICs).

The MRFFICs are funded primarily via loan arrangements between the Board in respect of the MRFF and each respective MRFFIC. These loans are designated as financial assets and measured at fair value with changes in their fair value recognised in the Administered Schedule of Comprehensive Income each reporting date. Interest receivable at reporting date is included in the fair market value.

Loan assets are repayable on demand. Interest rates are set on the loans having regard to the 10 year government bond rate in the market in which the underlying investment is made.

As the MRFFICs hold a material portion of the investments of the investment funds, disclosures in the financial instruments and managing financial risk notes (Note C2.3) include the underlying investments of the MRFFICs on a look-through basis as this provides users of the information with more relevant information in relation to the investment portfolio.

Income

Interest income is interest earned on cash and cash equivalents. Dividends, franking credits and distribution income are recognised when the right to receive payment is established.

Net realised gain/loss on investments held at fair value through profit or loss includes:

  Realised interest income including coupon payments received during the year

  Net realised gains/losses including realised gains and losses as compared to the original cost of the investment

  Net realised changes in the fair value including the current year unrealised gain/loss on investments held as at reporting date.

C2.1 Investment funds operating results

30 June

30 June

2021

2020

Total

Total

$'000

$'000

Revenue

Interest

27,729

119,148

Dividends and distributions

342,978

123,636

Total revenue

370,707

242,784

Gains on financial investments

3,425,134

924,129

Total income

3,795,841

1,166,913

Expenses

Supplier expenses

59,663

43,786

Foreign exchange losses

106,371

546,348

Total expenses

166,034

590,134

Net investment funds return

3,629,807

576,779

less investment funds distributions

2,466,353

1,997,374

Net surplus/(deficit)1

1,163,454

(1,420,595)

Attributable to:

BAF

-

11,523

EIF

-

25,984

DCAF

(1,625,299)

(1,337,826)

MRFF

1,586,619

(363,408)

ATSILSFF

210,242

(73,144)

FDF

467,601

164,837

ERF

524,291

151,439

Net surplus/(deficit)1

1,163,454

(1,420,595)

1 Includes investment funds distributions for DCAF $1,688.9 million, MRFF $572.6 million, ATSILSFF $54.8 million, FDF $100.0 million and ERF $50.0 million (2020: DCAF $1,550.5 million, MRFF $392.7 million and ATSILSFF $54.1 million).

C2.2 Investment funds financial position

30 June

30 June

2021

2020

Total

Total

$'000

$'000

Assets

Financial assets measured at amortised cost

Cash and cash equivalents

7,448,519

9,941,755

Other receivables

179,018

80,500

Total financial assets measured at amortised cost

7,627,537

10,022,255

Financial assets measured at FVPL

Interest bearing securities

23,221,409

21,115,280

MRFFICs

5,694,071

4,173,062

Listed equities and managed investment schemes

6,593,300

5,289,594

Collective investment vehicles

5,892,514

2,861,761

Restricted cash

366,065

188,548

Derivatives

131,592

593,424

Total financial assets measured at FVPL

41,898,951

34,221,669

Total assets

49,526,488

44,243,924

Liabilities

Financial liabilities measured at amortised cost

Trade creditors and accruals

23,679

13,430

Unsettled purchases

250,660

119,497

Total financial liabilities measured at amortised cost

274,339

132,927

Financial liabilities measured at FVPL

Derivatives

334,966

166,652

Total financial liabilities measured at FVPL

334,966

166,652

Total liabilities

609,305

299,579

Net assets

48,917,183

43,944,345

Attributable to:1

DCAF

15,479,414

16,507,380

MRFF

22,020,381

17,221,711

ATSILSFF

2,162,782

1,952,540

FDF

4,600,692

4,133,091

ERF

4,653,914

4,129,623

Total net assets

48,917,183

43,944,345

1 Includes investment funds distributions for DCAF $1,688.9 million, MRFF $572.6 million, ATSILSFF $54.8 million, FDF $100.0 million and ERF $50.0 million (2020: DCAF $1,550.5 million, MRFF $392.7 million and ATSILSFF $54.1 million).

Collective investment vehicles

The investment funds have committed to provide capital to various collective investment vehicles. The total of these commitments at reporting date is $2,415 million (2020: $1,920 million). The investment fund’s commitments, being capital calls, are set out in the various underlying subscription documents. The actual timing of the capital calls to be made by the managers of these vehicles is uncertain, as it is dependent on the managers sourcing suitable investment opportunities. The investment funds have appropriate liquidity planning in place to ensure a suitable allocation of resources will be available to cover these future commitments of capital.

The table below provides more detailed information of collective investment vehicles at the reporting date:

30 June 2021

Description of underlying Strategy

Capital committed local currency

Outstanding commitments AUD equivalent

Net capital cost AUD equivalent

Fair value AUD equivalent

$'000

$'000

$'000

$'000

Directly held by MRFF and DCAF

Alternatives

AUD

4,013,246

-

3,907,010

4,092,815

Alternatives

USD

147,025

-

175,488

158,362

Debt

AUD

475,000

156,250

318,775

359,103

Debt

EUR

300,072

338,645

136,674

148,005

Debt

USD

174,012

86,176

153,400

176,243

Global Infrastructure

AUD

275,772

-

276,278

397,393

Global Infrastructure

EUR

22,310

-

39,979

43,853

Global Infrastructure

USD

281,250

243,303

140,954

120,821

Private Equity

USD

73,167

50,228

46,342

47,342

Property

EUR

35,000

41,378

13,828

13,051

Property

GBP

56,225

89,905

13,487

23,501

Property

USD

384,027

249,203

258,358

312,025

Total

1,255,088

5,480,573

5,892,514

Via MRFF investment companies

Alternatives

AUD

796,306

50,721

822,158

861,686

Alternatives

USD

418,000

2,131

553,752

559,059

Debt

USD

140,000

119,702

73,872

80,529

Private equity

AUD

158,854

63,857

79,603

81,747

Private equity

EUR

67,897

13,537

21,956

38,171

Private equity

USD

1,206,775

470,534

1,036,301

1,560,752

Property

EUR

240,000

261,834

118,314

126,596

Property

USD

145,589

178,188

12,935

12,680

Total

1,160,504

2,718,891

3,321,220

C2.3 Managing financial risk

The investment funds have entered into forward foreign exchange currency contracts to manage their exposure to foreign exchange risk. The investment funds also use interest rate futures and swaps to manage their exposure to interest rate risk and credit default swaps to manage their exposure to credit risk and/or gain indirect exposure to credit risk. The investment funds also use equity derivatives to manage market exposure to equity price risk.

C2.3.1 Market risk

Market risk is the risk of loss arising from movements in the prices of various assets flowing from changes in interest rates and foreign currency risk.

Interest rate risk

Interest rate risk exposure

The investment funds are exposed to risk of loss arising from movement in the prices of various assets flowing through interest rate changes. The total exposure for each class of financial asset is set out below.

Financial assets exposed to interest rate risk

Variable interest rate

Fixed interest rate

Non-interest bearing

Total

30 June 2021

$'000

$'000

$'000

$'000

Cash and cash equivalents

7,588,781

-

-

7,588,781

Interest bearing securities

6,274,504

17,405,920

-

23,680,424

Other financial assets

-

-

18,257,283

18,257,283

Total investment

13,863,285

17,405,920

18,257,283

49,526,488

Total Interest rate swaps (notional amount) - pay

(618,026)

(140,636)

-

Total Interest rate swaps (notional amount) - receive

140,636

618,026

-

Currency swaps (notional amount) - pay

(847,366)

-

-

Currency swaps (notional amount) - receive

1,545,998

-

-

30 June 2020

Cash and cash equivalents

9,941,755

-

-

9,941,755

Interest bearing securities

4,090,581

17,459,972

-

21,550,553

Other financial assets

-

-

12,751,616

12,751,616

Total investment

14,032,336

17,459,972

12,751,616

44,243,924

Total Interest rate swaps (notional amount) - pay

(5,561)

(163)

-

Total Interest rate swaps (notional amount) - receive

163

5,561

-

Currency swaps (notional amount) - pay

(906,474)

-

-

Currency swaps (notional amount) - receive

1,246,026

-

-

Interest rate derivative contracts

The investment funds had open positions in exchange traded interest rate futures contracts and interest rate swap agreements at the reporting date. Interest rate derivative contracts are used by the investment funds investment managers to manage the exposure to interest rate risk and to ensure it remains within approved limits. The notional value of the open contracts and their fair value are set out below.

30 June 2021

30 June 2020

Notional
value

Fair market value

Notional
value

Fair market value

$'000

$'000

$'000

$'000

Open contracts

Buy domestic interest rate futures contracts

787,599

2,180

800,146

5,116

Sell domestic interest rate futures contracts

(129,689)

374

-

-

Buy international interest rate futures contracts

642,579

23,534

878,379

4,045

Sell international interest rate futures contracts

(2,116,633)

(31,783)

(2,178,546)

(6,721)

Receiver (fixed) interest rate swap agreements

618,026

10,001

5,561

50

Payer (fixed) interest rate swap agreements

(140,636)

3,620

163

(13)

Buy forward contracts on mortgage backed securities

65,486

(289)

185,922

(70)

Sell forward contracts on mortgage backed securities

(8,598)

2

-

-

Total open contracts

(281,866)

7,639

(308,375)

2,407

Interest rate sensitivity analysis

The investment funds are exposed to interest rate risk in relation to their investments. The impact of a change in interest rates is disclosed in the table below, with all other variables held constant. The table demonstrates the impact on the operating result of a 74 basis point (2020: 9 basis point) change in bond yields with all other variables held constant. It is assumed that the 74 basis point change occurs as at the reporting date and there are concurrent movements in interest rates and parallel shifts in the yield curves. A 74 basis point movement would impact on the debt portfolios' (including derivatives) contribution to the investment funds operating result. The impact on the operating result includes the increase/(decrease) in interest income on floating rate securities from the basis point change.

Sensitivity by year

Risk variable

Change in risk variable

Net cost of services

$'000

2021

Discount rate

+0.74%

(102,125)

-0.74%

110,361

2020

Discount rate

+0.09%

20,130

-0.09%

(20,113)

Foreign currency risk

The investment funds undertake certain transactions denominated in foreign currencies and are therefore exposed to the effects of exchange rate fluctuations. Exposure to foreign currency risk is managed utilising forward foreign exchange contracts. The exposure in AUD equivalents to foreign currency risk at reporting date is as follows.

Financial assets exposed to currency risk

USD

EURO

GBP

Other

Total

30 June 2021

$'000

$'000

$'000

$'000

$'000

Cash & cash equivalents

748,256

111,520

36,171

54,487

950,434

Interest bearing securities

3,751,731

1,031,079

742,563

2,410,118

7,935,491

Listed equities

3,460,723

514,757

204,251

2,370,879

6,550,610

Collective investment vehicles

2,967,248

370,161

23,501

-

3,360,910

Other investments

88,585

10,226

4,436

3,513

106,760

Receivables

46,150

5,381

5,270

9,299

66,100

Payables

(181,998)

(20,191)

(6,119)

(49,838)

(258,146)

Swaps

14,365

-

-

171

14,536

Total physical exposure

10,895,060

2,022,933

1,010,073

4,798,629

18,726,695

Forward exchange contracts

Buy foreign currency

2,856,459

259,839

116,851

2,455,121

5,688,270

Sell foreign currency

(10,093,940)

(1,727,857)

(1,002,778)

(3,710,307)

(16,534,882)

Currency options

575,000

-

-

50,000

625,000

Commodity futures

-

-

-

311,527

311,527

Total derivative exposure

(6,662,481)

(1,468,018)

(885,927)

(893,659)

(9,910,085)

Net exposure

4,232,579

554,915

124,146

3,904,970

8,816,610

Financial assets exposed to currency risk 30 June 2020

Cash and cash equivalents

825,406

73,333

39,991

25,638

964,368

Interest bearing securities

3,308,806

754,612

682,791

1,395,222

6,141,431

Listed equities

2,463,948

356,138

163,717

1,877,499

4,861,302

Collective investment vehicles

2,238,488

117,921

1,173

-

2,357,582

Other investments

68,258

20,334

5,057

15,548

109,197

Receivables

17,003

3,069

535

7,025

27,632

Payables

(112,605)

(5,619)

(813)

(509)

(119,546)

Swaps

(902,082)

669

-

(1,833)

(903,246)

Total physical exposure

7,907,222

1,320,457

892,451

3,318,590

13,438,720

Forward exchange contracts

Buy foreign currency

2,039,614

455,901

115,234

331,908

2,942,657

Sell foreign currency

(7,085,044)

(1,195,924)

(870,594)

(677,547)

(9,829,109)

Total derivative exposure

(5,045,430)

(740,023)

(755,360)

(345,639)

(6,886,452)

Net exposure

2,861,792

580,434

137,091

2,972,951

6,552,268

Foreign currency sensitivity analysis

The sensitivity analysis table below demonstrates the impact on the operating result of a movement in the value of the AUD relative to the actual net exposures as at year end, with all other variables held constant.

Sensitivity by year

Risk variable

Change in risk variable

Net cost of services

$'000

2021

Exchange rate

+7.89%

972,664

-7.89%

(960,890)

2020

Exchange rate

+8.41%

803,421

-8.41%

(803,421)

Other price risk

The investment funds are exposed to price risk arising from equity investments. The equity price risk is the risk that the value of the investment funds equity portfolio will decrease as a result of changes in the levels of equity indices and the price of individual stocks. The exposure to equity price risk at the reporting date was as follows:

30 June 2021

$'000

Domestic equities and managed investment schemes

1,738,425

International equities and managed investment schemes

4,854,875

Total equity price risk exposure

6,593,300

Equity derivative contracts

Equity futures are used to manage the exposure to equity price risk. The notional value and fair value of the open positions at the reporting date are set out in the following table.

Notional
value

Fair market value

30 June 2021

$'000

$'000

Buy domestic equity futures contracts

21,488

(136)

Sell domestic equity futures contracts

(39,907)

(44)

Buy international equity futures contracts

469,555

9,095

Sell international equity futures contracts

(144,416)

(4,480)

Over the counter international equity call options

53,155

1,688

Over the counter international equity put options

(53,155)

(919)

Over the counter total return international equity swaps

519,497

17,384

Total equity derivative contracts

826,217

22,588

Equity price sensitivity analysis

The analysis below demonstrates the impact on the operating result of the following movements:

· +/- 20% on Australian equities

· +/- 15% on International equities

The sensitivity analysis has been performed to assess the direct risk of holding equity instruments. The analysis is undertaken on the base currency values of the underlying exposures.

Impact on operating results

30 June 2021

$'000

20% increase in Australian equities

440,118

15% increase in International equities

1,791,114

Total

2,231,232

20% decrease in Australian equities

(440,170)

15% decrease in International equities

(1,786,384)

Total

(2,226,554)

C2.3.2 Liquidity risk

Liquidity risk is the risk that the investment funds will not be able to meet their obligations as they fall due. The investment funds must be in a position to meet the distribution payments required up to the amount periodically declared. This is managed by the FFMA under the Short-term Liquidity Risk Policy which includes a short-term crash test which is applied to the portfolio of each investment fund to ensure they are able to meet their immediate cash flow obligations under a plausible but very severe market dislocation.

C2.3.3 Credit risk management

Credit risk is the risk of loss that arises from a counterparty failing to meet their contractual commitments in full and on time, or from losses arising from the change in value of a traded financial instrument as a result of changes in credit risk on that instrument. The Board sets limits on the credit ratings of debt investments when appointing investment managers. These limits are reflected in the underlying investment mandates and are monitored by FFMA with compliance reported to the Board. The investment funds maximum exposure to credit risk at reporting date in relation to each class of recognised financial asset is the carrying amount of those assets as indicated in the investment funds financial position.

30 June

30 June

2021

2020

Interest bearing securities issued by

$'000

$'000

As at 30 June 2021, the investment funds had an exposure of 20.95% of net assets to interest bearing securities issued by domestic banks and cash deposits held with banks. Exposures to domestic banks are identified in this table.

Commonwealth Bank of Australia

3,263,042

3,318,536

Westpac Banking Corporation

696,546

671,006

National Australia Bank

2,230,799

2,687,108

Australia and New Zealand Banking Group

3,981,409

3,835,059

Total

10,171,796

10,511,709

Credit exposure by credit rating

30 June

30 June

2021

2020

$'000

$'000

Long-term rated securities

The investment funds use Moody's and Standard & Poors credit rating scales to report exposure to credit risk. The long term credit risk exposures range from ‘AAA’ (extremely strong capacity to meet financial commitments) to ‘below investment grade/not rated’. The investments classified as below investment grade are held in debt mandates. This table provides information regarding the credit risk exposures of the debt instruments held by the investment funds at reporting date according to the credit ratings of the underlying debt instruments.

AAA

4,589,864

2,650,972

AA

6,826,475

8,961,491

A

4,958,947

5,835,081

BBB

726,346

837,920

Below investment grade/not rated

2,185,865

1,715,996

Short-term rated securities

A-1+

11,169,028

11,006,669

A-1

443,908

58,748

A-2

25,098

-

Other

US Government Guaranteed

343,674

425,431

Total debt securities held

31,269,205

31,492,308

Other non-debt financial assets

18,257,283

12,751,616

Total financial assets

49,526,488

44,243,924

Credit risk derivatives

The investment funds managers utilise credit default swaps to gain exposure to, and to hedge, credit risk. The investment funds transact in credit default swaps in the form of centrally cleared over-the-counter contracts. Centrally cleared transactions are cash margined at least daily. Managers are required to fully cash back all sold credit protection positions. Outstanding positions are marked to market and collateralisation of out of the money positions is required by the central clearing exchange.

Notional value

Fair market value

30 June

30 June

2021

2021

$'000

$'000

The notional value of the open credit default swap positions, the impact on increasing or reducing credit exposures and their fair value are set out in this table.

Buy credit protection

23,510

(308)

Sell credit protection

(70,023)

(2,381)

Total

(46,513)

(2,689)

C3 Superannuation

C3.1 Overview of schemes

Finance administers the following defined benefit superannuation schemes on behalf of the Australian Government:

  Commonwealth Superannuation Scheme (CSS), including the 1922 Scheme

  Public Sector Superannuation Scheme (PSS)

  Parliamentary Contributory Superannuation Scheme (PCSS)

  Governor-General Pension Scheme (G-GPS)

  Judges' Pensions Scheme (JPS)

  Federal Circuit Court Judges Death and Disability Scheme (FCCJDDS).

The CSS, PSS and PCSS are closed to new members.

Finance recognises an Administered liability for the present value of the Australian Government's expected future payments arising from the PCSS, JPS, G-GPS and FCCJDDS and the unfunded components of the CSS and PSS. These liabilities are based on an annual actuarial assessment. The funded components of these schemes are reported

in the financial statements of the respective schemes. Finance also has the responsibility to record the Australian Government's transactions in relation to the above schemes.

Policy and measurement

Actuarial gains or losses are recognised in other comprehensive income (OCI) in the year in which they occur. Interest on the net defined benefit liability is recognised in the surplus/(deficit), the return on plan assets excluding the amount included in interest income is recognised in OCI.

Superannuation liabilities are calculated annually as the present value of future benefit obligations less the fair value of scheme assets. The rate used to discount future benefits is determined by reference to the government bond rate at the reporting date.

Amounts recognised in the Schedule of Comprehensive Income and Schedule of Assets and Liabilities

C3.1 Overview of schemes

Other

CSS

PSS

PCSS

G-GPS

JPS

FCCJDDS

Total

$'000

$'000

$'000

$'000

$'000

$'000

$'000

30 June 2021

Revenues

45,203

1,087,356

304

-

-

-

1,132,863

Expenses

1,385,321

6,179,610

23,857

400

93,045

858

7,683,091

OCI

6,187,398

11,417,171

84,974

3,431

193,505

281

17,886,760

Liabilities

86,190,702

137,440,003

1,169,312

19,752

1,589,154

-

226,408,923

30 June 2020

Revenues

56,830

1,107,327

378

-

-

-

1,164,535

Expenses

1,704,212

6,425,875

30,261

6,453

108,372

971

8,276,144

OCI

(1,274,833)

(4,398,397)

99,764

3,550

156,298

968

(5,412,650)

Liabilities

94,766,023

143,944,373

1,275,686

24,253

1,743,593

467

241,754,395

The expected employer productivity contributions for 2022 are: $5.9 million for the CSS and $140.1 million for the PSS (2021 actual: $7.2 million for the CSS and $159.6 million for the PSS).

C3.2 Scheme information

The funding arrangements for the various schemes:

Scheme

Funding arrangements

1922 Scheme

Unfunded. There are no longer any members contributing under this Act. Benefits are paid to members from the Consolidated Revenue Fund (CRF).

CSS and PSS

Partially funded. Contributions generally comprise basic member contributions and employer productivity (up to 3%) contributions. Benefits are paid to members from the CRF.

PCSS

Unfunded. Member contributions are a fixed percentage of: parliamentary allowance; salary for Ministers of State; and allowance by way of salary for office holders, which is paid into the CRF. Benefits are paid to members from the CRF.

G-GPS, JPS and FCCJDDS

Unfunded. Members are not required to contribute towards the cost of their benefit during their term of appointment. Benefits are paid to members from the CRF.

The nature of the benefits provided under the schemes:

Scheme

Benefits Paid

1922 Scheme

The benefit payable is a lifetime indexed pension (indexed in January and July in line with changes in the CPI). The payments and liabilities in respect of these members are included in the CSS amounts.

CSS

The types of benefits payable are a lifetime indexed pension (indexed in January and July in line with changes in the CPI), a lifetime non-indexed pension and a lump sum payment. The main retirement benefit is the employer-financed indexed pension that is calculated by a set formula based on a member's age, years of contributory service and final salary.

Where a member has preserved their benefit in the scheme, when the benefit becomes payable the employer financed indexed pension is calculated by applying age-based factors to the amount of two and a half times the member's accumulated basic member contributions and interest.

Member’s basic contributions, employer productivity contributions and interest can be taken as a lump sum or an additional non-indexed lifetime pension. This benefit is determined by the value of contributions and investment returns, and in the case of the non-indexed pension by applying age-based factors.

PSS

The types of benefits payable are a lifetime indexed pension (indexed in January and July in line with changes in the CPI) and a lump sum payment. On retirement a lump sum benefit is payable which is calculated based on the member’s length of contributory membership, their rate of member contributions and final average salary (average of a member’s superannuation salary on their last three birthdays).

Where a member preserves their benefit in the scheme, generally the member’s lump sum benefit at that time is crystallised with the funded component of the benefit accumulating with interest and the unfunded component accumulating with changes in the CPI, until the benefit becomes payable.

Generally members can convert 50% or more of their lump sum to a lifetime indexed pension. The indexed pension is calculated by applying age-based factors to the amount of the lump sum to be converted to a pension.

PCSS

The benefit payable is a lifetime pension or lump sum depending on length of service and additional offices held.

Where a retiring member has sufficient parliamentary service to meet the pension qualification period for a lifetime pension (which is payable as set out in the Act), pension benefits are expressed as a percentage of the superannuation salary applicable for the PCSS and are indexed by movements in that superannuation salary.

A PCSS member who qualifies for a pension can also elect to convert up to half of their benefit to a lump sum. Lump sum benefits are payable to PCSS members who do not have sufficient parliamentary service to qualify for a lifetime pension.

G-GPS

The benefit payable is a lifetime pension equal to 60% of the salary of the Chief Justice of the High Court of Australia.

There is no minimum qualification period.

JPS

The benefit payable is a lifetime pension equal to 60% of the judicial salary, payable where a judge has 10 or more years’ service and is 60 years of age or older.

Provisions are made for part pension (pro-rated based on length of service) where a judge retires on reaching the maximum retirement age with at least 6 years but less than 10 years service.

FCCJDDS

Federal Circuit Court Judges who retire due to permanent disability are provided with a pension equal to 60% of the salary the Judge would have received if they had not retired, and is payable until the earlier of the Judge attaining age 70, or his/her death.

In addition, a Judge continues to receive employer superannuation contributions in respect of this pension until they reach age 65.

Regulatory Framework

The following table details the enabling legislation for each of the individually disclosed defined benefit schemes and whether the scheme must comply with the requirements of the Superannuation Industry (Supervision) Act 1993, as well as a number of other Acts.

Scheme

Enabling Act

Period open to new members

Regulatory requirement

CSS

Superannuation Act 1976

1 July 1976 to 30 June 1990

Compliance with the Superannuation Industry (Supervision) Act 1993 required for these schemes.

PSS

Superannuation Act 1990

1 July 1990 to 30 June 2005

1922 Scheme

Superannuation Act 1922

1 July 1922 to 30 June 1976

These schemes are exempt from Superannuation Industry (Supervision) Act 1993.

PCSS

Parliamentary Contributory Superannuation Act 1948

Up to 8 October 2004

G-GPS

Governor-General Act 1974

To present

JPS

Judges’ Pensions Act 1968

To present

FCCJDDS

Federal Circuit Court of Australia Act 1999

To present

Governance

The Commonwealth Superannuation Corporation (CSC) was established under the Governance of Australian Government Superannuation Schemes Act 2011 and is the trustee for the CSS and PSS. CSC is responsible for:

  providing administration services for each scheme

  management and investment of scheme assets

  compliance with superannuation taxation and other applicable laws

  compliance with relevant legislation including the Governance of Australian Government Superannuation Schemes Act 2011.

CSC is supported by a custodian and other specialist providers.

The PCSS is administered by Finance on behalf of the Minister for Finance. The Parliamentary Retiring Allowances Trust (the Trust) has responsibility for matters where discretion has been given under the Parliamentary Contributory Superannuation Act 1948. The Trust consists of five trustees - the Minister for Finance (or a Minister authorised by the Minister for Finance) who is the presiding trustee, plus two Senators and two Members of the House of Representatives appointed by their respective Houses.

The enabling Acts for the ‘other’ defined benefit superannuation schemes confer certain powers to the Secretary of Finance in relation to administration of each scheme. Day-to-day administration of the schemes is undertaken by Finance.

C3.3 Risks and assumptions

The schemes are exposed to interest rate risk, investment risk, longevity risk and salary risk. The following pages identify and explain the amounts reported in these financial statements and detail the principal actuarial assumptions underpinning each of the major schemes, including an analysis of the sensitivity of changes in these assumptions to the amounts reported in the financial statements.

Composition of scheme assets

The fair value of scheme assets for CSS and PSS at 30 June 2021 is $23.0 billion (30 June 2020 was $20.8 billion). The assets are diversified in the following sectors:

CSS

PSS

Australian equities

26%

26%

International equities

25%

25%

Private capital

9%

9%

Property and infrastructure

11%

11%

Corporate bonds

7%

7%

Alternative strategies

11%

11%

Cash and sovereign bonds

11%

11%

This includes $6.8 million (2020: $5.8 million) of Australian Government bonds.

Key judgements and estimates

CSS, PSS, and PCSS

Assumptions have been made regarding rates of retirement, death (for active, preserved and pension members), mortality improvements, invalidity, resignation, retrenchment, retention and take up rates of pensions in the scheme. Assumptions have also been made for the ages of spouses and rates of member contributions. These assumptions are consistent to those used within the 2020 Long Term Cost Reports (LTCRs).

Membership data as at 30 June 2020 has been rolled forward to 30 June 2021 by making allowance for estimated investment earnings, contributions, salary increases, benefit payments and benefit accruals, using the actuarial assumptions from the LTCRs where other information is not available. The defined benefit obligation calculated is based on the rolled forward membership data that was then adjusted to reflect the difference between expected benefit payments and actual benefit payments to 30 June 2021.

The fair value of scheme assets as at 30 June 2021 (CSS and PSS only) were estimated using the unaudited net scheme assets available to pay benefits at 31 May 2021 rolled forward to 30 June 2021 with cash flow items provided by the CSC. An estimate of the actual rate of investment return earned by the scheme during June 2021 was used in determining the fair value of scheme assets.

Other Schemes (G-GPS, JPS and FCCJDDS)

Membership data as at 31 May 2021 has been rolled forward to 30 June 2021. Other actuarial assumptions are consistent to those used within the LTCRs.

Key actuarial assumptions

The key actuarial assumptions for the defined benefit obligation are set out in the table below:

CSS

PSS

Other

Discount rate

2.0%

2.3%

2.3%

Salary growth rate to June 2023

1.75%

1.75%

1.75%

Salary growth rate to June 2024

2.0%

2.0%

2.0%

Salary growth rate to June 2025

2.5%

2.5%

2.5%

Salary growth rate after June 2025

3.5%

3.5%

4.0%

Pension increase rate to June 2023

2.0%

2.0%

1.75%

Pension increase rate to June 2024

2.5%

2.5%

2.0%

Pension increase rate to June 2025

2.5%

2.5%

2.5%

Pension increase rate after June 2025

2.5%

2.5%

4.0%

Maturity profile (years)

13.2 (CSS 1976)

21.2

15.7 (PCSS)

7.7 (CSS 1922)

11.3 (G-GPS)

15.2 (JPS)

0 (FCCJDDS)

Process used to determine actuarial assumptions

Discount rate

The relevant Australian Government Treasury Bond rates were used for the calculation of the defined benefit obligation.

Salary growth rate

For the CSS and PSS a short-term rate of 1.75% is applied to 30 June 2023, transitioning to the long-term rate of 3.5% from July 2025. The short-term rate is based on the government's current workplace bargaining policy plus assumed promotional increases. The long-term rate is determined by taking into consideration the duration of the salary linked liabilities, economy-wide wage growth, productivity growth and inflationary expectations plus assumed promotional increases.

The assumed rate for future salary increases has been determined having regard to the average expected long-term outlook for national wage inflation.

The long-term rates are consistent with those used in the LTCRs for the schemes.

Expected pension increase rate

For the CSS and PSS, pensions are increased in line with changes in the CPI. For Other Schemes, the assumed rate for the pension increase has been determined having regard to the average estimated applicable wage inflation.

Maturity profile

This reflects the weighted average duration of each schemes’ defined benefit obligation as at 30 June.

Sensitivity analysis for significant actuarial assumptions

Finance has conducted a sensitivity analysis to quantify the impact of changes in the key underlying assumptions on the defined benefit obligation. The defined benefit obligation has been recalculated by changing the assumptions as outlined below, whilst retaining all other assumptions.

CSS

PSS

Other

Assumption

Movement

$'000

$'000

$'000

Discount rate1

+ 0.5%

(5,286,959)

(14,592,270)

(197,870)

- 0.5%

5,815,918

16,805,705

221,966

Salary growth rate

+ 0.5%

36,699

2,859,691

211,476

- 0.5%

(72,883)

(2,697,986)

(190,886)

Pension increase rate

+ 0.5%

5,004,902

12,588,376

n/a

- 0.5%

(4,611,981)

(11,280,717)

n/a

1 An increase in the discount rate between financial years generates a decrease in the defined benefit obligation and a gain in OCI. Conversely, a decrease in the discount rate between financial years causes an increase in the defined benefit obligation and a loss to OCI.

C3.4 Superannuation Schemes

30 June 2021

30 June 2020

CSS

PSS

Other

Total

CSS

PSS

Other

Total

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

Reconciliation of the present value of the defined benefit obligation

Value at beginning of the year

96,649,398

162,849,191

3,043,999

262,542,588

97,774,221

153,837,624

3,259,826

254,871,671

Current service cost

86,865

3,750,797

67,281

3,904,943

114,223

3,891,640

85,106

4,090,969

Interest expense

1,322,386

2,746,014

50,879

4,119,279

1,625,097

2,900,439

60,951

4,586,487

Contribution from scheme participants

24,551

520,800

-

545,351

29,960

536,665

-

566,625

Productivity contribution

7,226

159,566

-

166,792

8,931

157,180

-

166,111

Actuarial losses/(gains) in liabilities arising from:

Changes in demographic assumptions

(1,033,900)

8,184,695

96,943

7,247,738

-

-

-

-

Changes in financial assumptions

(6,138,785)

(20,492,590)

(321,753)

(26,953,128)

1,585,136

3,333,201

(125,464)

4,792,873

Liability experience

1,193,515

3,571,154

(57,381)

4,707,288

(351,631)

604,088

(135,116)

117,341

Benefits paid

(4,139,282)

(2,618,040)

(101,750)

(6,859,072)

(4,135,163)

(2,388,383)

(101,304)

(6,624,850)

Taxes, premiums and expenses paid

(1,092)

(23,828)

-

(24,920)

(1,376)

(23,263)

-

(24,639)

Closing value of the defined benefit obligation

87,970,882

158,647,759

2,778,218

249,396,859

96,649,398

162,849,191

3,043,999

262,542,588

Reconciliation of the fair value of plan assets

Value at beginning of the year

1,883,375

18,904,818

-

20,788,193

2,270,954

19,548,008

-

21,818,962

Interest income

23,930

317,201

-

341,131

35,108

366,204

-

401,312

Actual return on scheme assets less interest income

208,228

2,680,430

-

2,888,658

(41,328)

(461,108)

-

(502,436)

Contribution from scheme participants

24,551

520,800

-

545,351

29,960

536,665

-

566,625

Productivity contribution

7,226

159,566

-

166,792

8,931

157,180

-

166,111

Net appropriation from the CRF

3,773,244

1,266,809

101,750

5,141,803

3,716,289

1,169,515

101,304

4,987,108

Benefits paid

(4,139,282)

(2,618,040)

(101,750)

(6,859,072)

(4,135,163)

(2,388,383)

(101,304)

(6,624,850)

Taxes, premiums and expenses paid

(1,092)

(23,828)

-

(24,920)

(1,376)

(23,263)

-

(24,639)

Closing fair value of plan assets

1,780,180

21,207,756

-

22,987,936

1,883,375

18,904,818

-

20,788,193

Closing value of the net defined benefit liability

86,190,702

137,440,003

2,778,218

226,408,923

94,766,023

143,944,373

3,043,999

241,754,395

The fair value of CSS and PSS scheme assets relates to investments in the Pooled Superannuation Trust (PST).